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Saving Pittsburgh from itself
City first must help itself By Jake Haulk Tuesday, August 24, 2004 The Pittsburgh oversight board will recommend a comprehensive financial reform package to the state Legislature that should put the city on the path to solvency. Building upon $33 million in cuts from the Act 47 recovery team, the board asked the city to deliver additional savings and/or enhanced non-tax revenues of $17 million. That would cut the 2005 budget deficit by $50 million, which is roughly equivalent to 13 percent of the city's 2004 general fund budget. In Mayor Tom Murphy's letter to the oversight board this month, there was little in the way of cost reductions. But there was heavy reliance on questionable revenue sources. The majority of the $17 million relies on the state and federal governments or nonprofits: $7.6 million from the city's RAD funds taken from the Pittsburgh Development Fund bonds (the Legislature will use slots proceeds to retire those bonds); $5 million from increased contributions from nonprofits; $2 million from a Homeland Security grant; $1 million in increased EMS billings; and $1 million in cuts to workers' compensation and health care costs. But the $7.6 million in RAD dollars should not be allowed to count toward the $17 million the city was supposed to come up with. It was freed up by legislative action; it should be viewed as new revenue and not based on any effort by the city to save money or to find other local revenue enhancements. The $10 million per year the city will get from the Pittsburgh casino isn't being counted toward the $17 million nor should the additional money arising from the retirement of development fund bonds. Nonprofits will be leaned on to give $5 million more in lieu of taxes above and beyond the $6 million they are being counted on to give by the Act 47 team. The hospitals also are expected to take over EMS service. The city, however, will offer only $1 million in actual cost reductions by reducing the costs of health care and workers' compensation. It is unfortunate the city will not target the workers' comp costs more seriously. Pittsburgh is far out of line with other cities regarding claim payments. The savings are not what would be expected from the leadership of a city that is on the brink of disaster. A more refreshing approach would be for the mayor to ask the people he appoints to the major authorities to identify quickly a set of parcels that could be auctioned to the private sector. With few exceptions, the Mayor appoints these boards and wields significant influence. Furthermore, the mayor should request that the Urban Redevelopment Authority board forward to the city the $3.4 million in annual repayments of loans made from the Pittsburgh Development Fund. The URA also should turn over to the city that fund's remaining cash, nearly $8 million as of the end of 2002. But none of this has happened. Instead, we get a questionable recovery package. Pittsburgh cannot seem to come to grips with the reality that it still has a serious overspending problem and that its authorities should be a source of financial help. Instead, the city is, in effect telling the oversight board, the Legislature and the public that it cannot bring itself to make necessary cuts in spending and needs to have substantial new tax revenues to solve its financial difficulties. Jake Haulk is president of the Allegheny Institute for Public Policy(www.alleghenyinstitute.org). Eric Montarti is a policy analyst there Visit .